The Case Of The Board Member Who Didn’t Show Up – Or Did She?
Consider a board with a total of five authorized members but with only three members in office. The board is facing a various contentious decision on whether to engage in a transaction. Two of the board members favor approval and one opposes. All three board members vote on whether to proceed with negotiations. As expected, the vote is two votes Read more...
Court Holds Vote To Remove Director Is Not An Exercise Of Free Speech
When directors vote to remove a fellow director, are they exercising their free speech rights? This may seem to be a question that is reserved for courses in legal theory. In California, however, answering the question can determine whether a plaintiff will stay in court. In Donovan v. Dan Murphy Foundation, Cal. Ct. of Appeal Case No. B230820 (April 18, Read more...
The Corporations Code Can Make Suing Your Former Employees Costly
Supreme Court Justice Felix Frankfurter once told the following story about Oliver Wendell Holmes, Jr. and Ralph Waldo Emerson. When Holmes at the urging of his father visited the great author, Emerson asked “Young man, have you read Plato?” When Holmes said no, Emerson said: You must. You must read Plato. But you must hold him at arm’s length and say, “Plato, Read more...
Ban On Corporate And Union Contributions To Candidates Qualified For The November Ballot
In December, California Secretary of State Debra Bowen announced that she has certified the first initiative for the November 6, 2012, presidential election ballot. Among other things, this initiative would ban corporations, labor unions and public employee labor unions from making contributions to any candidate, candidate controlled committee, or any other committee including a political party committee, if those funds Read more...
Bill Proposes Another Reason Not To Incorporate In California
In January, I wrote about Senator Noreen Evans’ introduction of a bill, SB 982, to require corporations to issue a report on planned political spending as well as expenditures for the previous fiscal year. Now, Assembly members Jared Huffman and Michael Allen have introduced a bill, AB 2050, that provides: No domestic corporation may, directly or indirectly, make any monetary or Read more...
Converting Rice May Be Easier Than Converting To A Flexible Purpose Corporation
The process for converting rice sounds like some medieval torture. Rice is soaked, steamed under pressure, and then dried. While not pleasant, conversion can, and does, occur. The same may not be true for converting a corporation into a flexible purpose corporation. Flexible purpose corporations are corporations formed under Title I, Division 1.5 of the California Corporations Code, Section 2500 et Read more...
California Corporate Contribution Initiative Cleared For Circulation
Opponents of the Supreme Court’s decision in Citizens United v. Federal Election Commission, 130 S. Ct. 876, 558 US 50, 175 L. Ed. 2d 753 (2010) are fighting back in California on numerous fronts. Last month, California State Senator Noreen Evans introduced a bill, SB 982, to require corporations to issue a report on planned political spending as well as expenditures Read more...
Is A Director An “Official At The Highest Level Of Corporate Management”?
Liberty Mutual Ins. Co. v. Superior Court, 10 Cal. App. 4th 1282 (1992) involved an attempt by a plaintiff to depose the president of an insurance company. In response, the First District Court of Appeal adopted what is known as the “apex doctrine” – holding: when a plaintiff seeks to depose a corporate president or other official at the highest level of Read more...
Forming A Benefit Or Flexible Purpose Corporation? Some Pitfalls To Avoid
In previous blogs, I’ve noted the appearance of two new types of California corporations – the flexible purpose corporation and the benefit corporation. Because the laws creating both of these forms took effect on January 1, organizers have been forced to draft on a tabula rasa. Here are a few drafting pitfalls that have come to my attention. Benefit Corporations Section 14602 of Read more...
Initiative Seeks To Dehumanize Corporations In California
Are corporations “persons”? The California Corporations Code answers this question quite directly in Section 18 which defines “person” as including corporations and natural persons. The Corporate Securities Law of 1968 goes even further – defining “person” to mean an individual, a corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust, an unincorporated organization, Read more...
